You have to make a 90,000,000 payment in Japanese Yen
Question: 1.You have to make a 90,000,000 payment in Japanese…
- You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 20th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.
a.Describe the position you decide to enter (long or short).
b.Describe the contract (what month, and what quantity).
c.Document the gain or loss due to marking to market every day that your position is open.
d.What is the total cost in US$ after you have closed out your futures positions, and made your payment?
e.What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?
f.Repeat steps a) – e) assuming that you expect a payment of 900,000 British pounds on close of business day, Friday, January 20th. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 62,500 British pounds.
Japanese Yen Data
Daily Settlements for Japanese Yen Future (FINAL)Trade Date: Wednesday, 01/18/2017
| Month | Open | High | Low | Last | Change | Settle | Estimated Volume | Prior Day Open Interest |
| MAR 17 | 88835 | 88935 | 87285 | 87360 | -740 | 88175 | 147,488 | 203,079 |
| JUN 17 | 89250 | 89385B | 87745A | 87820B | -745 | 88625 | 383 | 8,556 |
| SEP 17 | 89455 | 89535B | 88285A | 88285A | -760 | 89110 | 11 | 57 |
| DEC 17 | – | – | 88925A | 88925A | -755 | 89605 | 0 | 15 |
| MAR 18 | – | – | 89500A | 89500A | -740 | 90150 | 0 | 34 |
| JUN 18 | – | – | 90110A | 90110A | -760 | 90740 | 0 | 11 |
Daily Settlements for Japanese Yen Futures (FINAL)Trade Date: Friday, 01/20/2017
| Month | Open | High | Low | Last | Change | Settle | Estimated Volume | Prior Day Open Interest |
| MAR 17 | 87080 | 87695 | 86800 | 87400 | +390 | 87650 | 195,951 | 194,478 |
| JUN 17 | 87570 | 88125B | 87255A | 87830A | +390 | 88095 | 319 | 8,477 |
| SEP 17 | – | 88555B | 87815A | 88370A | +380 | 88575 | 0 | 59 |
| DEC 17 | 88860 | 89000B | 88395A | 88860 | +375 | 89070 | 1 | 16 |
| MAR 18 | – | 89455B | 88965A | 89455B | +390 | 89625 | 0 | 34 |
| JUN 18 | – | – | 89630A | 89840B | +360 | 90210 | 0 | 11 |
Spot data:
| Jul.Day | YYYY/MM/DD | Wdy | USD/JPY |
| 2457771 | 2017/01/17 | Tue | 0.0088515 |
| 2457772 | 2017/01/18 | Wed | 0.0088184 |
| 2457773 | 2017/01/19 | Thu | 0.0086728 |
| 2457774 | 2017/01/20 | Fri | 0.0086888 |
British Pound Data
Daily Settlements for British Pound Future (FINAL)Trade Date: Wednesday, 01/18/2017
| Month | Open | High | Low | Last | Change | Settle | Estimated Volume | Prior Day Open Interest |
| MAR 17 | 1.2419 | 1.2425 | 1.2268 | 1.2278 | -.0110 | 1.2301 | 127,644 | 227,440 |
| JUN 17 | 1.2452 | 1.2454B | 1.2301A | 1.2305B | -.0110 | 1.2333 | 290 | 1,031 |
| SEP 17 | 1.2376 | 1.2421B | 1.2327 | 1.2327 | -.0109 | 1.2367 | 2 | 175 |
| DEC 17 | – | – | 1.2381A | 1.2381A | -.0110 | 1.2401 | 0 | 129 |
| MAR 18 | – | – | 1.2426A | 1.2426A | -.0109 | 1.2446 | 0 | 4 |
| JUN 18 | – | – | 1.2478A | 1.2478A | -.0108 | 1.2488 | 0 | 3 |
Daily Settlements for British Pound Futures (FINAL)Trade Date: Friday, 01/20/2017
| Month | Open | High | Low | Last | Change | Settle | Estimated Volume | Prior Day Open Interest |
| MAR 17 | 1.2349 | 1.2394 | 1.2273 | 1.2390 | +.0043 | 1.2392 | 98,611 | 223,605 |
| JUN 17 | 1.2398 | 1.2424B | 1.2308 | 1.2422 | +.0043 | 1.2425 | 129 | 1,348 |
| SEP 17 | 1.2395 | 1.2455B | 1.2347A | 1.2442B | +.0044 | 1.2460 | 1 | 175 |
| DEC 17 | – | 1.2487B | 1.2395A | 1.2475A | +.0043 | 1.2494 | 0 | 129 |
| MAR 18 | – | 1.2521B | 1.2439A | 1.2518A | +.0040 | 1.2538 | 0 | 4 |
| JUN 18 | – | 1.2551B | 1.2491A | 1.2551B | +.0038 | 1.2579 | 0 | 3 |
Spot Data:
| Jul.Day | YYYY/MM/DD | Wdy | USD/GBP |
| 2457771 | 2017/01/17 | Tue | 1.2384 |
| 2457772 | 2017/01/18 | Wed | 1.2309 |
| 2457773 | 2017/01/19 | Thu | 1.2318 |
| 2457774 | 2017/01/20 | Fri | 1.2328 |
